U.S. Water Services, Inc. v. Chemtreat, Inc.

NOTE: This order is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
U.S. WATER SERVICES, INC.,
Plaintiff/Counterclaim Defendant-Appellant,
AND
GLOBAL PROCESS TECHNOLOGIES, INC. AND
ROY JOHNSON,
Counterclaim Defendants-Appellants,
v.
CHEMTREAT, INC.,
Defendant/Counterclaimant-Appellee.
______________________
2013-1236
______________________
Appeal from the United States District Court for the
District of Minnesota in No. 11-CV-895, Judge Patrick J.
Schiltz.
______________________
Before REYNA, WALLACH, and HUGHES, Circuit Judges.
PER CURIAM.
ORDER
On June 6, 2014, this court issued an order to show
cause why this appeal should not be transferred to the
2 U.S. WATER SERVICES v. CHEMTREAT
U.S. Court of Appeals for the Eighth Circuit. U.S. Water
Services, Inc. (“USWS”) and ChemTreat, Inc.
(“ChemTreat”) each filed a timely response. Because this
court concludes that it lacks jurisdiction over this appeal,
we order the case transferred to the Eighth Circuit.
BACKGROUND
This case arises out of a complaint USWS filed
against ChemTreat in the U.S. District Court for the
District of Minnesota, alleging misappropriation of trade
secrets under Minnesota law. Several months after
USWS filed its Complaint, the Patent and Trademark
Office (“PTO”) issued U.S. Patent No. 8,039,244 (“the ’244
patent”), covering technology related to USWS’s pending
trade secret litigation. USWS was the sole licensee of the
’244 patent, and ChemTreat promptly moved to amend its
answer to add counterclaims against USWS for declarato-
ry judgment of noninfringement and invalidity. After the
parties stipulated to the addition of patent co-owners
Global Process Technologies, Inc. and Roy Johnson, the
magistrate judge granted leave for ChemTreat to pursue
its patent counterclaims. 1 Not long after, the parties
settled the trade-secret claim, which the district court
dismissed with prejudice.
On July 5, 2012, USWS moved to dismiss
ChemTreat’s patent counterclaims for lack of standing.
After a hearing, the district court denied the motion,
holding there was an Article III case or controversy be-
tween the parties with respect to the ’244 patent. U.S.
1 The ’244 patent is co-owned by defendants-
appellants Roy Johnson and Global Process Technologies,
Inc., and is exclusively licensed to USWS. Mr. Johnson is
the Chief Innovation Officer for USWS. For convenience,
this court refers to all counterclaim defendants as
“USWS.”
U.S. WATER SERVICES v. CHEMTREAT 3
Water Servs., Inc. v. ChemTreat, Inc., No. 11-CV-895,
2012 WL 5904341 (D. Minn. Nov. 26, 2012) (“Jurisdiction
Order”).
After allowing USWS to undertake additional discov-
ery, the district court granted ChemTreat’s motion for
summary judgment of noninfringement. U.S. Water
Servs., Inc. v. ChemTreat, Inc., No. 11-CV-895, 2013 WL
173736 (D. Minn. Jan. 16, 2013). USWS filed an appeal to
this court, asserting jurisdiction under 28 U.S.C.
§ 1295(a)(1).
DISCUSSION
Under the relevant jurisdictional provision, this court
has exclusive jurisdiction “of an appeal from a final deci-
sion of a district court of the United States . . . if the
jurisdiction of that court was based, in whole or in part,
on section 1338 of this title.” 28 U.S.C. § 1295(a)(1)
(2006). Section 1338, in turn, provides district courts
with original jurisdiction “of any civil action arising
under” the patent laws. Id. § 1338(a) (2006). Our juris-
diction therefore “turns on whether the action arises
under federal patent law,” which is decided by applying
the “well-pleaded-complaint rule.” 2 Holmes Grp., Inc. v.
2 This court’s jurisdictional statute was recently
amended by the Leahy-Smith America Invents Act, Pub.
L. No. 112-29, § 19(b), 125 Stat. 284, 331–33 (2011)
(“AIA”). The AIA extends this court’s jurisdiction to “any
civil action arising under, or . . . any civil action in which
a party has asserted a compulsory counterclaim arising
under” the patent laws. 28 U.S.C. § 1295(a)(1) (2012).
USWS commenced this action before these amendments
took effect on September 16, 2011, so we apply the pre-
AIA version of the statute. AIA Pub. L. 112-29, § 19(e),
125 Stat. at 333; see also Wawrzynski v. H.J. Heinz Co.,
728 F.3d 1374, 1378 (Fed. Cir. 2013) (actions commenced
4 U.S. WATER SERVICES v. CHEMTREAT
Vornado Air Circulation Sys., Inc., 535 U.S. 826, 829
(2002).
Applying the well-pleaded complaint rule to this case,
USWS’s Complaint does not arise under the patent laws.
Minnesota state law “creates the [trade secret] cause of
action,” and USWS’s right to relief does not “necessarily
depend[] on resolution of a substantial question of federal
patent law.” Id. at 830. The district court’s jurisdiction
over USWS’s state law claim was therefore based solely
on diversity between the parties. See 28 U.S.C. § 1332.
Because the district court’s jurisdiction was not “based, in
whole or in part, on section 1338,” this court lacks juris-
diction over USWS’s appeal. Id. § 1295(a)(1). Nor do
ChemTreat’s patent law counterclaims establish jurisdic-
tion, because a counterclaim “cannot serve as the basis for
‘arising under’ jurisdiction.” Holmes, 535 U.S. at 831.
This court recently held it lacked jurisdiction over a
similar case in which the district court exercised diversity
jurisdiction over the plaintiff’s state law claims, and the
defendant filed patent law counterclaims. Wawrzynski v.
H.J. Heinz Co., 728 F.3d 1374 (Fed. Cir. 2013). The
Wawrzynski court concluded the “well-pleaded complaint”
did not arise under the patent laws, and transferred the
case to the relevant regional circuit. Id. at 1381. In light
of the similarities between this case and Wawrzynski, this
court issued an order to show cause why this appeal
should not be transferred to the Eighth Circuit.
In response to the order, ChemTreat states it “is
aware of no authority to resist transfer of this appeal to
the United States Court of Appeals for the Eighth Cir-
cuit.” ChemTreat Resp. 1. USWS, however, argues this
court has jurisdiction because (1) USWS consented to the
before September 16, 2011 are not subject to the AIA
amendments).
U.S. WATER SERVICES v. CHEMTREAT 5
filing of ChemTreat’s counterclaim, and (2) ChemTreat’s
counterclaim “added new parties whose only involvement
in the litigation was as defendants to the declaratory
judgment action.” USWS Resp. 6–7.
USWS’s arguments for jurisdiction in this court are
unpersuasive. Although the parties’ implied amendment
of a complaint may provide a foundation for Federal
Circuit jurisdiction, there was no “express or implied
consent” to add a patent claim to USWS’s trade secrets
Complaint. See Christianson v. Colt Indus. Operating
Corp., 486 U.S. 800, 814–15 (1988); see also Wawrzynski,
728 F.3d at 1379 (“[O]ne party’s consent is not sufficient
for us to deem the complaint amended.”). Moreover,
USWS’s “additional parties” argument does not alter the
fact that its Complaint does not arise under the federal
patent laws. Static Control Components, Inc. v. Lexmark
Int’l, Inc., 697 F.3d 387, 399 (6th Cir 2012) (reasoning
that a defendant’s federal claims against third-party
defendants do not transform the case into one arising
under federal law for purposes of 28 U.S.C. § 1331, and
explaining the same test applies when determining
whether a case arises under the patent laws for purposes
of 28 U.S.C. § 1338), aff’d on other grounds, 134 S. Ct.
1377 (2014).
For these reasons, this court lacks jurisdiction over
USWS’s appeal.
Accordingly,
IT IS ORDERED THAT:
(1) The appeal is transferred to the United States
Court of Appeals for the Eighth Circuit.
(2) All other pending motions are transferred to the
Eighth Circuit.
FOR THE COURT
6 U.S. WATER SERVICES v. CHEMTREAT
July 10, 2014 /s/ Daniel E. O’Toole
Date Daniel E. O’Toole
Clerk of Court